PGS Announces Unaudited First Quarter 2005 Results

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Psg Solutions	LSE:PGS	London	Ordinary Share	GB00B0WHXB01	ORD 20P

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PGS Announces Unaudited First Quarter 2005 Results Good momentum for 2005 - strong seismic outlook and pricing trends OSLO, Norway, May 24 /PRNewswire-FirstCall/ -- Petroleum Geo-Services ASA ("PGS" or the "Company") (NYSE:PGS)(OSE:PGS) announced today its unaudited first quarter 2005 results under U.S. GAAP. * Operating profit substantially strengthened: Excluding Pertra and the Pertra sales gain, operating profit of $40.8 million, up $16.4 million (67%). * Enhanced financial structure and flexibility: Net interest bearing debt was reduced by $203 million in Q1 providing a stronger financial platform for future growth. PGS was also assigned a Ba3 credit rating by Moody's and a B+ from Standard and Poor's * Improved contract margins and multi-client late sales: Order backlog and current bidding levels form basis for expectations of improved contract performance throughout the year and a continued strong market into 2006 Strong Q1 sales of data offshore West Africa and in the North Sea and Gulf of Mexico * FPSO performance impacted by short-term factors: Riser problem on Varg field eliminated. Production disturbances caused by water separation issues on Petrojarl Foinaven/Foinaven field which will continue into Q2 and Q3 * Pertra sold for $150.3 million gain: Due to a recent US accounting interpretation Pertra is not classified as discontinued operations but is included in reported numbers through February 2005 Key figures as reported +-------------------------------------------------------------------+ | | Quarter ended March 31, | Year ended | | | | December 31, | |--------------------------+-------------------------+--------------| | | 2005 | 2004 | 2004 | | | Unaudited | Unaudited | Audited | | (In millions of dollars) | | | | |--------------------------+------------+------------+--------------| | Revenues | $ 285.0 | $ 247.7 | $ 1,129.5 | |--------------------------+------------+------------+--------------| | Operating profit (loss) | 189.6 | 35.5 | 35.7 | |--------------------------+------------+------------+--------------| | Net income (loss) | 155.4 | (12.0) | (134.7) | |--------------------------+------------+------------+--------------| | Earnings (loss) per | 7.77 | (0.60) | (6.74) | | share ($ per share) | | | | |--------------------------+------------+------------+--------------| | Adjusted EBITDA (as | 91.6 | 99.1 | 412.2 | | defined) | | | | |--------------------------+------------+------------+--------------| | Net cash provided by | 73.6 | 50.7 | 282.4 | | operating activities | | | | |--------------------------+------------+------------+--------------| | Cash investment in | (9.9) | (15.2) | (41.1) | | multi-client | | | | |--------------------------+------------+------------+--------------| | Capital expenditures | (15.2) | (23.6) | (148.4) | |--------------------------+------------+------------+--------------| | Total assets (period | 1,918.6 | 1,997.7 | 1,852.2 | | end) | | | | |--------------------------+------------+------------+--------------| | Cash and cash | 332.1 | 113.1 | 132.9 | | equivalents (period end) | | | | |--------------------------+------------+------------+--------------| | Net interest bearing | | | | | debt (period end) | $ 791.9 | $ 1,064.1 | $ 995.3 | +-------------------------------------------------------------------+ Svein Rennemo, PGS Chief Executive Officer, commented, "Our first quarter results reflect the early positive effects of a strong improvement in the geophysical markets. At the end of first quarter 2005 our order backlog is substantially improving both in volume and associated expected margins. Current levels of market activity indicate that this will continue into 2006. With what we believe is the most effective seismic fleet in the industry we are well positioned to benefit from this buoyant market and the more favorable returns in the geophysical industry. Currently we see towed streamer contract margins this year improved 15 to 25 percentage points compared to average for 2004 with less variation in rates between regions. After the installation of the new Varg riser, the Petrojarl Varg FPSO is now producing as expected. We see an increased demand for FPSO solutions worldwide and are actively working to expand this business profitably both within and outside the North Sea. We have achieved a sound financial platform having significantly reduced our debt following the sale of Pertra. With this platform and improved earnings and cash-flow generation we are well positioned to realize our ambition to further grow and develop our two core businesses. We aim to do this through pursuing both organic growth and strategic opportunities within prudent financial management centered around improving ROCE and cash flow." Q1 Highlights PGS group * Revenues of $285.0 million, up $37.3 million (15%) from Q1 2004, driven by strong contract revenues and multi-client late sales in Marine Geophysical * Excluding Pertra and the Pertra sales gain, operating profit of $40.8 million, up $16.4 million (67%). Operating profit, as reported, of $189.6 million * Net income of $155.4 million compared to net loss of $12.0 million in Q1 2004 * Cash flow from operations, $73.6 million, up $22.9 million from Q1 2004 * Net interest-bearing debt reduced by $203 million to $792 million compared to $995 million at December 31, 2004 * $175 million of the $250 million 8% Senior Notes called for repayment in April 2005 at 102% of par Marine Geophysical * Strong multi-client late sales totaling $42.2 million, up $13.5 million (47%) from Q1 2004. Sales were stronger than we anticipated at the beginning of the year, driven by West Africa and North Sea sales * Contract acquisition revenues totaling $91.6 million, up $20.2 million (28%) from Q1 2004 * Margins improved in contract acquisition despite incurring a loss in our seafloor 4C operations and Ramform Valiant operating disturbances * Operating profit of $22.6 million, up $18.7 million from Q1 2004 * Strong order backlog with March 31 contract backlog of $188 million compared to $170 million at the end of 2004 Onshore * Performance as expected with operating profit of $1.9 million, up $0.2 million from Q1 2004 * Awarded large transition zone project in Nigeria * Order backlog at March 31 of $108 million compared to $66 million at the end of 2004 Production * Operating profit of $15.5 million, down $6.1 million from Q1 2004 mainly due to effect of the now resolved damage to Varg riser and lower Petrojarl Foinaven volumes: -- New main riser successfully installed on the Varg field March 9, bringing Petrojarl Varg production back to normal after production being constrained to approximately 15,000 barrels per day since early November 2004 -- Revenues on Petrojarl Foinaven reduced by water/oil separation issues and related maintenance slowdown in March and natural field decline * Lower production on Petrojarl I due to natural field production decline * Revenues on Ramform Banff recognized based on minimum day rate provision Outlook Full Year 2005 Marine Geophysical * As a result of the marine 3D industry seismic fleet being near full capacity utilization streamer contract profitability is expected to further improve in Q2 and second half * The seafloor 4C crew is expected to incur a loss in Q2 but to improve in second half * North Sea season is expected to be strong and five PGS streamer acquisition vessels will operate in the region in Q2 and Q3 * Due to exceptionally high sales in Q4 2004, and despite Q1 2005 sales exceeding Q1 2004 levels, full year 2005 multi-client late sales are still expected to be lower than 2004 levels * Cost levels impacted by increased fuel prices and depreciation of USD currency compared to 2004 Onshore * Full year revenues and operating profit expected above 2004 levels * Start up of transition zone project in Nigeria rescheduled to Q3, due to customer preferences, resulting in a weak Q2 Production * Total oil production from the four FPSOs for the full year is expected to be in line with or slightly lower than 2004. * Foinaven oil/water separation issues will continue to affect volumes in Q2 and will lower production in Q3 due to planned three week slowdown starting end July and two week shut down in September for installation of a system to re-inject produced water * Increased full year operating cost compared to 2004 due to increased maintenance costs on the FPSOs as the time since deployment on their respective fields is increasing and due to the depreciation of the US dollar compared to 2004 Sale of Pertra to Talisman completed On March 1, 2005, PGS sold its wholly-owned oil subsidiary, Pertra AS, to Talisman for a sales price of approximately $155 million. The Company recognized a $150.3 million gain from the sale, including the $2.5 million received to grant an option to make certain amendments to the charter and operating agreement for the Petrojarl Varg as described below. Pertra is consolidated in the Q1 2005 financial statements through February 2005 and the Pertra operations contributed revenues of $27.6 million (after adjusting for elimination of Petrojarl Varg compensation) and an operating loss of $1.5 million. Pertra has not been classified as discontinued operations in the Company's historical financial statements reflecting a recent Emerging Issues Task Force interpretation relating to reporting of discontinued operations under U.S. GAAP. As part of the transaction, Talisman has agreed to share with PGS, on a 50/50 basis (post petroleum tax) for each of 2005 and 2006, their revenues from production of the Varg Field in excess of $240 million. These possible additional proceeds from the sale of Pertra have not been recognized in the consolidated financial statements since such proceeds are not certain. In connection with the sale, PGS entered into an agreement with Talisman under which the PL038 license holders have an option, at their discretion, to extend the term of the charter and operating agreement for the Petrojarl Varg until 2010. The option is exercisable until February 1, 2006, and if exercised the license owners will be obligated to pay a one time fee of $22.5 million and to guarantee a minimum of $190,000 per day in compensation for the use of Petrojarl Varg. PGS received $2.5 million at closing of the Pertra sale for granting this option. Under our existing contract with the PL038 license holders relating to the Petrojarl Varg, compensation consists of a fixed base day rate of $90,000 and a tariff of $6.30 per barrel produced. Subject to the option, PGS currently has the right to terminate the agreement if production from the Varg field falls below 15,700 barrels of oil per day. The full report can be downloaded from the following link: http://hugin.info/115/R/995527/150956.pdf FOR DETAILS, CONTACT: Ola Bosterud Sam R. Morrow Christopher Mollerlokken Phone: +47 6752 6400 US Investor Services: Renee Sixkiller, Phone: +1 281 509 8548 DATASOURCE: Petroleum Geo-Services ASA CONTACT: Ola Bosterud, Sam R. Morrow, Christopher Mollerlokken, all of PGS, +47-6752-6400 or, US Investor Services: Renee Sixkiller, +1-281-509-8548 Web site: http://www.pgs.com/ http://hugin.info/115/R/995527/150956.pdf

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